Report: TreeHouse looks to sell its trail mix business

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Dive Brief:

TreeHouse Foods is reportedly putting its trail-mix segment Flagstone Foods up for sale, two sources told The New York Post. The company hired Goldman Sachs to help with the sale, according to the sources.

TreeHouse paid $860 million for the trail-mix business in 2014 when it purchased the brand from private-equity firm Gryphon Investors. The two sources told The New York Post that TreeHouse could get significantly less than what it originally paid.

In its recent third-quarter earnings, the company's net sales decreased 10% from last year and TreeHouse focused on how it plans to continue restructuring going forward. "In the normal course of business, TreeHouse Foods is always taking a strategic look at all parts of its portfolio," a company spokesman told The Post Friday.

Dive Insight:

This news isn't surprising, given TreeHouse's poor financial performance and its previously announced plan to slim its portfolio. After another rough year of plummeting sales and increasing job losses, the company's quarterly earnings released earlier this month reflected those struggles, and it makes sense that the company is now looking to make cuts.

Last year, the company announced a program called TreeHouse 2020, a restructuring program through which the private label manufacturer is working to streamline expenses by scrutinizing business practices and getting rid of less profitable products. This quarter, the company's snacks segment — including bars, snack nuts and trail mix — posted a net sales decline of 23.6% when compared to last year.

Now Flagstone Foods is on the chopping block, as the company hopes to shed a less profitable brand just four years after purchasing it. And TreeHouse is likely to take a big loss.

Who could buy Flagstone Foods from TreeHouse? A source told the New York Post that 8th Avenue Food & Provisions, a company formed this year to for the former Post Holdings’ private-label business, could look to purchase the brand. Although TreeHouse hasn't had much luck with it, there has been a growing consumer acceptance of private label products. If the next company to snatch up Flagstone Foods could capitalize on that market and move trail mix to the trendy convenient better-for-you snacking spot in the market, it may perform better.

In fact, a source also told the New York Post that TreeHouse had difficulty integrating Flagstone and said the brand has been "mismanaged.”

Looking at how TreeHouse's performance in recent years, the pronouncement isn't shocking. The company saw abrupt executive turnover late last year and then had to lower its guidance twice. TreeHouse then hired Steve Oakland, former head of the U.S. food and beverage division at Smucker, to serve as next CEO. But turning the tide for a company with low customer engagement, closing plants and hurting sales hasn't been easy.

This is not the first sale the company has looked into this year, and it may not be the last. In July, B&G Foods bought McCann’s Irish Oatmeal from the company for $32 million. Back in February, the company shuttered its California snack plant, and its Nebraska office is slated to close by Jan. 31, 2019. This could indicate that the company is looking to keep dropping brands and space.

Continuing to shrink the company's portfolio could help turn around the negative streak TreeHouse has faced — or it could be a sign that the private label manufacturer is ultimately preparing itself for a sale.